Brokerage Windows: The Last Frontier or a Trap for the Unwary?
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Fiduciary and Plan Governance What should fiduciaries of participant-directed plans consider in deciding whether to allow participants to direct their investments using arrangements loosely referred to as "brokerage windows"? The realm of ERISA plan investments through these arrangements remains largely uncharted territory. Fiduciaries operate under the broad understanding that ERISA Section 404(a) fiduciary duties of prudence and loyalty apply, but with little guidance on how. Source: Wagnerlawgroup.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers The Impact(s) of Automatic Enrollment A new study finds that automatic enrollment not only triples the participation rate of new hires, but that over time the vast majority increase their deferral rates. The report from researchers at Vanguard found that among new hires, participation rates triple to 91% under automatic enrollment, compared with 28% under voluntary enrollment. Over time, 9 in 10 participants increase their deferral rates, either automatically or on their own, and more than three-quarters of participants remain exclusively invested in the default investment fund. Source: Asppa.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers The Line Between Education and Fiduciary Advice Does the industry have a clear definition of what the DOL would consider investment education (not advice) in a 401k plan so that a financial advisor would not have to follow the requirements of Prohibited Transaction Exemption 2020-02? Source: Napa-net.org How to Stay Out of Trouble as a Retirement Plan Provider There are two types of trouble: trouble is where you get entangled in a dispute for what is right, and trouble for doing something wrong. This article is all about the second kind of trouble and the stuff you could do to avoid it and therefore sidestep harming your business. Source: Jdsupra.com Plan Communications Pandemic Reveals Demand for Virtual and Self-Serve 401k Education: New Schwab Data With the multiemployer relief legislation cleared from Congress' docket, look for policymakers to turn to efforts to expand retirement plan coverage, ARA staff explained during a March 23 NAPA webcast. Will Hansen, Chief Government Affairs Officer at the American Retirement Association, and Andrew Remo, the organization's Director of Legislative Affairs, offered their take on the legislative outlook for the rest of the year, as well as what retirement policy provisions we may see in forthcoming legislation. Source: Businesswire.com Demand Rising for Virtual and Self-Service 401k Education The popularity of virtual and self-service 401k educational sessions has grown since the start of the pandemic, but apparently that trend was accelerating even before then. Source: Napa-net.org »» Click here for more on Plan Education and Communications Court and Legal Is Participant Data a Plan Asset? Another Court Says No A closely watched case was filed in Texas against Shell Oil Company and Fidelity, the plan's recordkeeper, alleging that Fidelity engaged in a prohibited transaction by profiting from the use of participant data through its cross-selling practices. A ruling for plaintiffs would have required the court to go further than other courts that have addressed this issue and make a threshold determination that participant data is a plan asset. Once that hurdle was cleared, plaintiffs would have had to show that Fidelity was a fiduciary violating the ERISA prohibition in Section 406 against benefiting from the use of plan assets. However, on March 30, the Shell court dismissed the claims against Fidelity for failure to state an ERISA claim. Source: Cohenbuckmann.com In this two-part article, the authors provide a brief overview of 2020 trends and developments in fee and investment litigation and then explore more closely the key rulings and developments since 2015 and their impact on ERISA fee and investment litigation. This is part one of the article. Source: Jacksonlewis.com The Relentless Rules of Humble Arithmetic: 401k/403b Fiduciary Litigation at the Crossroads SCOTUS is currently deciding whether to hear the Hughes v. Northwestern University 403b case. The key issue in the case is an allegation of fiduciary breach by the plan concerning the level of the plan's fees. A number of large financial services firms have recently sold their 401k/403b divisions. Could a possible explanation be concern over a possible review and adverse decision by SCOTUS? Could the humble arithmetic and simplicity of the Active Management Value Ratio metric be a contributing factor in these decisions to leave the 401k/403b arena? Source: Iainsight.wordpress.com The Key to Avoiding Retirement Plan Excessive Fee Litigation The recent increase in litigation over retirement plans and, specifically, the fees those plans are being charged for administration and management, has many companies concerned about what they need to do to protect the plans they manage. Two recent federal district court rulings illustrate the necessity for plan sponsors to have a prudent decision-making process in place to successfully defend against excessive fee litigation. Source: Hallbenefitslaw.com Fidelity Fends Off Participant Data Claims Another federal court has weighed in on the status of participant data as a plan asset. The issue arose most recently last January in an excessive fee suit brought by the St. Louis-based law firm of Schlichter, Bogard & Denton on behalf of four participant-plaintiffs in Shell Oil's $10.5 billion 401k plan. The Schlichter firm took issue with the use of participant data by the recordkeeper to solicit non-plan-related services. Source: Napa-net.org Courts Split on Class Action Waivers, Arbitration Provisions in ERISA Litigation Courts have struggled through the years when considering the enforceability of mandatory class action waivers and arbitration provisions contained within ERISA plans and other employment-related agreements. Courts have taken various approaches in determining whether class action waivers and arbitration provisions are enforceable in ERISA-based litigation. These approaches are discussed here. Source: Hklaw.com Judge Moves Forward Claims in Lawsuit Against Schneider Electric A federal judge has moved forward a lawsuit brought by participants in the Schneider Electric 401k Plan alleging plan fiduciaries and Aon Hewitt Investment Consulting breached their fiduciary duties and engaged in prohibited transactions in violation of ERISA. In the lawsuit, the plaintiffs say that instead of acting in the exclusive best interest of participants, the defendants selected and retained proprietary Aon Hewitt collective investment trusts that only benefited Aon Hewitt. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Expanding Coverage Likely Next Target for Lawmakers With the multiemployer relief legislation cleared from Congress' docket, look for policymakers to turn to efforts to expand retirement plan coverage, ARA staff explained during a March 23 NAPA webcast. Will Hansen, Chief Government Affairs Officer at the American Retirement Association, and Andrew Remo, the organization's Director of Legislative Affairs, offered their take on the legislative outlook for the rest of the year, as well as what retirement policy provisions we may see in forthcoming legislation. Source: Asppa.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory Top Mistakes in Voluntary Correction Program (VCP) Submissions Before you (or your representative) send your VCP submission to the IRS, check to make sure it's error-free. If your submission has errors, it takes longer to review and delays the issuance of the compliance statement. The top mistakes noticed in VCP submissions are listed in this March 31, 2021 article update. Source: Irs.gov Significant Changes to 2022 Pension and IRA Reports Reflected on Draft Withholding Forms On March 12, the IRS released the latest versions of the 2022 draft withholding forms for pension, IRA, and annuity payments. While pension withholding elections have historically all been made on Form W-4P, that form will be split into two forms for 2022. Recordkeepers, plan sponsors and other payors may want to consider tackling these form changes early on, as they are likely to entail extensive system changes. Source: Groom.com »» Click here for more Compliance and Regulatory Material Marketplace News Sageview Acquires Remaining Retirement Plan Business From Arnerich Massena DiMeo Schneider to Rebrand as Fiducient Advisors Hub Launches 401k Service for Small Businesses
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